H.R. 1055 — Introduced in House

I 118th CONGRESS 1st Session H. R. 1055 IN THE HOUSE OF REPRESENTATIVES February 14, 2023Ms. Plaskett (for herself and Ms. Velázquez) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to exclude certain amounts from the tested income of controlled foreign corporations, and for other purposes. 1. Short title This Act may be cited as the Territorial Economic Recovery Act. 2. Income of certain qualified possession corporations excluded from tested income (a) In general Section 951A of the Internal Revenue Code of 1986 is amended— (1) in subsection (c)(2)(A)(i), by striking and at the end of subclause (IV), by striking over at the end of subclause (V) and inserting and, and by adding at the end the following new subclause: (VI) any income of a qualified possession corporation that is effectively connected with the active conduct of a trade or business within a possession of the United States, over ; and (2) by adding at the end the following new subsections: (g) Possession of the united states For purposes of this section, the term possession of the United States means Puerto Rico, the Virgin Islands, and any specified possession described in section 931(c). (h) Qualified possession corporation For purposes of this section, the term qualified possession corporation means any controlled foreign corporation for any taxable year, if, for the 3-year period (or the period during which the controlled foreign corporation has been in existence, if shorter) ending in the taxable year preceding the taxable year in which the determination is made— (1) 80 percent or more of the gross income of such corporation was derived from sources within a possession of the United States, and (2) 75 percent or more of the gross income of such corporation was effectively connected with the active conduct of a trade or business within a possession of the United States. . (b) Effective date The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2022, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.